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Lessons Learned from Amazon's Customer-Obsessed Innovation Model

Feb 21, 2018

There are many factors behind the impressive rise of Amazon's stock price. The company is incredibly adept at entering - and seizing - new markets it enters. Amazon is now worth more than Walmart, Target, Best Buy, Macy's, Nordstrom, JCPenney and Sears combined. Think about that for a moment. Meanwhile, the company's core businesses continue to fire on all cylinders, helping the company to consistently beat earnings in 2017 while its share price is up about 20% in the first month of 2018.

It also doesn't hurt that, unlike most publicly-held companies, Amazon's board of directors gives Founder, CEO and Chairman Jeff Bezos and his teams plenty of runway to experiment with new products and services and fine-tune them until they're ready to be launched.

"There are a lot of reasons why Amazon is at a 52-week high but ultimately there's major momentum in each of the company's core businesses," said John Rossman, Managing Partner at Rossman Partners and author of The Amazon Way series. "Amazon is delivering on both growth and their operating metrics and they do such a great job on storytelling for all of the things they're doing like Echo that the media is just carrying the story for them," said Rossman, who will be sharing his insights as a former Amazon executive on how the company has built and nurtured a culture of innovation at HMG Strategy's upcoming 2018 CIO Summit of America on March 28th in New York.

Without question, a key contributor to Amazon's long-running success is the culture of innovation that has been created within the company. In The Amazon Way series, Rossman points to 14 leadership principles that contribute to strengthening Amazon's culture of innovation. These include its obsession for making things easier for customers, its relentless pursuit of making improvements to its products and services, and its fervor for delivering long-term value.

"I talk to many ex-Amazon leaders and I ask them what they miss compared to working at Amazon and they often come back to this notion of deep customer empathy informed by customer data," said Rossman. "Amazon continues to not be satisfied with the customer experience. They continue to refine the customer experience." This includes doing the right thing by customers, such as informing a customer when they've attempted to order books or products they'd previously purchased.

Rossman shares additional lessons that companies can learn from Amazon. "You should you always be looking to build a long-term relationship with your customer and make it as frictionless as possible," said Rossman. "Always be thinking about how to improve the customer experience and consider new ways to serve customers and generate new business opportunities."

Rossman spoke to Amazon's recent plans to form a healthcare company with JPMorgan Chase and Berkshire Hathaway. "They haven't make any big declarations yet, but you can be certain that its Whole Foods acquisition will play a key role into whatever their strikes into healthcare might be," said Rossman.

This may include Amazon's use of Whole Foods stores to provide customers with pharmacy services and medical advice much like the CVS/Aetna model that's evolving. "Or perhaps they become an intermediary like Express Scripts in delivering prescriptions to consumers" under a faster and more simplified approach, Rossman speculated.

One thing is certain - the opportunities in healthcare are too big for Amazon to ignore. "Healthcare represents a huge market opportunity for Amazon where the general customer experience is horrible. There's too much margin in it for Amazon not to try. Amazon may not have been super-fast on this front but they are patient investors."

It's also important to note that Bezos is a big believer in technology and how it can be used to reinvent the business. The takeaway here for CIOs, says Rossman, is that for too many years, the IT organization has been synonymous with supporting the systems of record and keeping the business humming.

"Now, senior executives recognize that technology can deliver competitive advantage," said Rossman. "The CIO must be at the strategy table and the CIO can't do it alone. Strategy must also come from the CEO and the business."

To learn more about John Rossman and other notable speakers who will be presenting at the 2018 CIO Summit of America, click here.

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